Innovation… Ill-Defined, Misunderstood and a Rare Occurrence

“Innovate or die.” “Ideation is the new thing.” “It’s a game-changer.” New this, new that, and blah, blah, blah. On and on we hear about the necessity for breakthrough creativity, to find the next best new thing, service or experience; the next Apple, Starbucks or Amazon. If we are not creating new today, we will be gone tomorrow.

How can we not all agree? Of course we do. But how many entrepreneurs, companies or their leaders really understand or agree on what game-changing innovation really is? And, more importantly, how many really understand how it is actually accomplished? And, further yet, how do we do it?

The answer to the last three questions is: very few. Otherwise there would be more Apples, Starbucks, and Amazons: fundamental “break-through” concepts.

What is it, Really?

First of all, innovation is in the eye of the beholder. And the beholder “be” the consumer. And when the beholder is confronted with some-thing new, or an experience, they’ve never seen or possessed before, and when it is so compelling to them that they change their behavior, it is only then that you know an innovation has been made, along with the creation of new consumer value.

But, there are two types of innovation: one changes the “game;” and the second creates a new “game.” And there are elements of both in truly powerful innovations. For example, Starbucks changed coffee-drinking behavior, but more importantly, created a new “game,” that of an experience called the “third place” outside work and home, where people could hang out, network, read, use the Internet, etc. Apple gave consumers a new perception of computers through design and integrated technologies, “changing the game,” so to speak. But the new game they created was an experience called the “genius bar” as a part of their breakthrough, holistic “must-go-to place” where Apple simplifies what is complex for consumers, where customers are educated, and have an incredibly fun experience, all at the same time.

Amazon changed the rules of the game of retailing and consumers’ shopping behavior; but more phenomenally, created an entirely new game, which no one will soon replicate.

Amazon is an awesome, digital marketplace, that they own independently, and where they can sell anything in the world to everybody in the world, better and faster than anybody else, 24/7, period.

Zara changed consumer behavior through changing the fashion “game:” speed; delivering new styles twice a week. But, the new game they created was the fast-fashion process, which is the time compression and unique integration of all of the back-end supply chain functions.

And, this raises another very important point about innovation. If whatever you create new today can be “knocked-off” tomorrow, then you haven’t either changed or created a new game. The Starbucks, Apple, Amazon and Zara innovations cannot be copied overnight. JC Penney’s planned innovation, in my opinion, if successfully implemented, will provide consumers a new and compelling shopping “place” and thus, will change the game of how merchandise is selected, presented and priced in stores. More importantly, they will have created a new “game,” which again is a fun, “third place” type experience where consumers will want to hang out. And there are those who already say that if Ron Johnson begins to realize success with his newly created “game,” his competitors will immediately copy what’s working. Ron addressed this in a discussion I had with him, and I’m paraphrasing,“…even if they wanted to, based on the time and capital required for what we’re doing, I don’t believe this is something they are going to want to pursue.”

How Do You Innovate?

Innovation emanates from the outside, in. It cannot emanate from the inside, out. The first speaks of tapping into a large strategic vision spun out of the emergence of an often unstated understanding what the world doesn’t yet know it wants, or needs.

The second scenario of innovating from the inside out, from the confines of one’s own mind, from a group of “brainstormers,” or from the genius of creatives inside of any company, is often a tactical “crap shoot.” All too often, innovation is constrained by quantitative extractions from research or limited by individual imagination, all in the hope that something new will “stick” with consumers.

If you research consumers with an open-ended question, “How would you describe a perfect shopping experience or describe what new product you would want?” They will respond with what they know, what they’ve already experienced, or what they’ve heard from their friends. If you connect the dots, you may identify some tactical innovations they would like: better service; better sight lines and lighting; more convenient shopping and quicker check-out, and, so forth. Or, for products, you might hear a lot about improvements they might desire, for instance a Tide detergent to be used in cold water (there are now 39 improved brands of Tide today). However, you’re not going to hear, for example, “we want to have branded drinking water that we will pay a lot of money for.”

A new outside-in model of innovation is emerging, emblematic of the digital age: gameification — crowd-sourced, open-sourced, collaborative product innovation. A news-making example of this is the FoldIt project from the University of Washington, where 280,000 online game participants collaboratively helped to decipher a crystal structure critical in an AIDS-causing monkey virus. The players produced an accurate 3D model of the enzyme in just 10 days. The problem of how to configure the structure of the enzyme had stumped post-doc scientists for 15 years. The application of this sort of open-source collaboration is truly a game changer, and a new game (literally).

Great individual innovators who change games and create new ones may use all traditional, non-traditional and sophisticated new technologies and research to understand consumers, their wants, desires, what changes their behavior, and hundreds of other characteristics down to a “gnat’s eyelash.” Such disciplines might suggest innovations that will change the game. But, as mentioned, they alone will merely yield a tactical “crap shoot.”

The great innovators possess something else. They are able to “leap” outside of the data, research, qualitative and quantitative stuff to intuitively and almost instinctively know what the consumer has never seen, felt or experienced. They know how to change or create a new game.

Howard Schultz, looked outside of the coffee-drinking paradigm. He observed in Italy the coffee-drinking social experience and compelling ambiance, on almost every street corner. Research and/or brainstorming did not tell him this concept would be overwhelmingly desired worldwide. The same was true of Steve Jobs and Jeff Bezos. And, while the jury is still out, Ron Johnson knows his vision will change and create a new game, so much so that he is not testing it first.

Proctor & Gamble, the giant and revered consumer package goods company, arguably has the largest and most sophisticated consumer research process, with 26 “innovation facilities” around the world, with 1000 Ph.D.’s among the 8000 total employees in those facilities. P&G has historially created both new products (game-changers), and new product categories (new games). As reported in a recent Businessweek article, they spent $2.03 billion during fiscal 2012 on R&D. New games created over the years: Ivory Soap; Crisco all-vegetable shortening; Dreft, the first synthetic detergent; Pampers, first disposable diaper; and others. Game changers would be all the new and improved brands and sub-brands such as Tide, Pringles, Crest and others.

But, think about this. If one were to identify within P&G, the individuals who connected the final dots and changed or created new games over the decades of time, with billions of dollars and human capital spent on innovation, they would be the great innovators. Those are the people who had that “something else:” that intuitive and instinctive gene; the person who was able to actually get out in front of the consumer’s mind and emotions and create something the consumer had never seen, but would love when they saw it.

In short, great innovators are not driven, guided, or told by consumers what they want or desire. Great innovators lead consumers and cultures and are worth their weight in gold. And, of course people like Steve Jobs, Howard Schultz and Jeff Bezos are worth more than their weight in gold. Hmmmmm….wonder about those few and far between within P&G’s $2 billion-a-year innovation process who ultimately innovated the big “aha?” Were they compensated their “weight in gold?”

What Happens When the “Game-Changer” Doesn’t Know it You Got It!

You might want to go back and read my article titled: “How Best Buy Blew the Chance to Out-Apple Apple.” The irony of Best Buy out-Appling Apple and then discontinuing it would be laughable if it were not so tragic. And, what happened is an example of a company’s leader who was changing and creating a new game, but didn’t realize it. How bad is that?

World-class and award-winning designer of “collaborative public experiences,” ESI Design’s Edwin Schlossberg, innovated a concept called a “digital playground,” and sought to perfect its commercial application. Realizing it required the buy-in of an electronics retailer, he found a fellow visionary in Brad Johnson, then CEO of Best Buy in 1998, and together they created a better than the current Apple model.

Two small store concepts were designed, one named Studio D for 20-something soccer moms and other more tech-challenged consumers; and Escape for younger tech-savvy consumers. The strategy was to customize these stores for specific niche demographics and lifestyles. And had they continued, they would likely have expanded across a multitude of niches. Each was designed and imaged differently, with customized merchandising and service strategies, and all were highly educational and experiential.

As I said, they almost certainly closed the initiative down because, though the stores were making money, they weren’t making enough money to justify the investment and the more complex operations (given the educational, experiential, and customized merchandise in these stores). Why spend time and investment on a side show when the main attraction in the big box was on fire at the time, with soaring double-digit growth?

Finally, had they continued, not only might they not be in the “pickle” they’re in, being bled to death by Amazon on one side and Walmart on the other; they would have preempted Apple. Can you imagine? Apparently they couldn’t. All of this is tragic, but true.